On Net Neutrality

What does Net Neutrality has to do with the slow but steady decline of the traditional media audiences? Although it may not seem so, both things are intimately connected. Here’s why the end of Net Neutrality is the only thing that can save the media. 


It is truth that, for the time being, the problem only arose, politically, in the United States, but there are two good reasons why we should expect whatever is decided in Washington to have effects elsewhere, namely in Europe. First reason: the US lead the way on whatever concerns the web 2.0 and therefore it’s the US that sets de standard for the business. As a consequence, these emerging “industry” will tend to regulate worldwide by the standard that is adopted in the US. Second reason: the development gap between the States and Europe on this matter (two, three years?) means that Americans are just experiencing now what the Europeans will inevitably experience later as a consequence to the natural development of the technologies. How such an issue will arise in Europe remains to be seen, but it is not hard do predict the discussion will be less transparent and mainly concentrated on political corridors, which of course makes it more difficult for Net Neutrality to be preserved. This means that, also on this matter, Europe is highly dependent on what happens in the US. 


Although phone and cable companies claim they need to charge heavier rates for premium packages, the reason for that is not technological and is doesn’t derive from the net; the reason is economical and it has to do with content. The cable TV (as we know it in Europe) is a good example:  if I’m not mistaken, using the current fibre optic connections, each cable operator could easily offer its clients thousands of stations with high quality and downward and upward streams. Nevertheless, cable operators choose not to do so because, restricting their offer to less than a hundred stations (most on a regular package and others on premium packages), they can charge more their subscribers and ask for a fee from the TV stations in order do distribute their signal. When a TV station’s prestige or popularity is such that it allows it to be “strong” before the cable company, it may not have to actually pay a fee to be present, but it will surely have to negotiate its presence in a way that is profitable also for the cable operator. That doesn’t change the basics: the cable company must profit from the deal. We’ll see later on how that is an example to illustrate the Net Neutrality issue.

Although somewhat different, also the TV and radio aerial (hertzian) spectrum serves as an example to what I mean, namely on the way both industries are structured. In most western countries (and, I imagine, also in the States) the radio spectrum is vast and almost fully occupied, with the several stations “leaned” against each other. The television spectrum, on the contrary, is pretty rarefied and, on one given region you can usually count by hand the number of stations that are distributed trough aerial antennas. Wherever we are in
Europe, if we go through the television spectrum we’ll find a lot of vacant “positions” and very few that are occupied. In what way does this very practical approach contribute to the debate about Net Neutrality? This very different ways in which the radio and aerial televison have structured and organized determined several consequences. The most important of those is the “attribution of value”. It is true that producing television is in itself more expensive than producing radio, but that does not explain de different “size” of the radio and TV corporations, the diverse degree of investment, income and profit both generate or the quantity of employment they produce. The main difference between them is that radio audiences are very disperse and television audiences are very concentrated. In radio they are so because there are many stations available, and in television they are also so because there are very few channels. More: it’s because radio audiences are scattered that radio stations are weak end mostly small corporations. And, on the other hand, it’s because TV audiences are hugely concentrated that television companies are such giants. Conclusion: the main difference between the two business models (among others) is that in radio each position in the spectrum has a low value (because it generates small audiences) and on television each one has a high value (because it attracts millions of people and generates big money).

And this is how the economic issue becomes very political. What happens is that the business models for radio and television are such because the political authority decided that on the radio spectrum all positions should be taken and on the TV spectrum only just a few would. By doing so, the regulator made radio an abundant “good” from the supply point of view (therefore with disperse audiences); and made television a scarce “good” from the same perspective (consequently with very concentrated audiences). A political decision determined that TV business thrives in abundance and high value and radio survives with scarcity and low value.

Also in the cable business, political authorities could have determined that, if the technical conditions allowed, let’s say, 1300 channels, they should all be occupied. Had it done so, the government would have determined a business model very similar to that of radio broadcasting. But, instead, political authorities gave the cable operators full power to occupy its bandwith with as many channels as they wanted. Therefore, cable companies chose to offer more channels than the aerial television (in order to be competitive), but less than they technically could. That’s why they now manage a scarce “good” (the scarcer the good, the more value it holds).

Internet faces a similar dilemma, converting the Net Neutrality issue into a political problem. Unlike aerial or cable TV, internet is not extensive; it is virtually unlimited. Therefore the “cake” isn’t cut into four or five big slices, like in aerial TV; nor in some few dozens tasty portions, like in cable TV; not even in hundreds of very thin pieces, like on the radio business. When it comes to internet, the “cake” shreds into a million tiny crumbs, each almost valueless. Just like TV or radio, internet connects those who produce messages to those who receive them. But in this case we’re talking about individual or very small groups of receivers and a growing number of individual or smaller producers. That’s why, no matter how fast it grows the number of people that produce or receive information over the internet, its enormous scattering generates much smaller audiences than the one you get on any TV or radio station.

That almost infinite scattering of the audiences interests the cable and telephone carriers that supply the internet connection just as much as it is welcomed by the media companies, who were usted to be the sole content providers (remember that old fashioned concept called “gatekeeping”?). None of them likes it! Today there are millions of people sharing content over the internet. Each of those “transactions” is in itself an act of value. Which means there is a huge – and getting huger – chain of value that is passing by any form of economical exploitation. There are simply too many things that are free on the internet. And those that are not free are usually very cheap. Probably because of web 1.0 fiasco, the economic establishment didn’t realize what was happening with web 2.0. Somebody was distracted and now it’s very difficult to turn back. But it’s not impossible…

Just as the television examples illustrated, the fact that a medium is abundant doesn’t necessarily mean that it has to be worthless and economically unprofitable. You only need a political regulation that artificially makes scarce what is abundant so that it may provide income for the suppliers of access, for the content providers and, in the end, for the political establishment itself, in taxes and financings. That’s why this lobby is so powerful: it represents big and strong companies, joins different businesses on the same side of the barricade and, most of all, it confronts something as weak as the public interest (I’ll look into further ahead). When de opponents to Net Neutrality propose different “stages” for internet access (they already exist for the consumers – and may yet get bigger – but not for the producers), what they’re asking is for the government do provide them with the legal terms to make scarce what now is abundant – the virtual “space” of the internet – thus allowing them to produce income for themselves and for the government from something that now is almost entirely free. From this point of view, the battle of Net Neutrality is a classic “they’ve got the guns, we’ve got the numbers”. And that’s why the outcome is unpredictable… 


Although media companies have not yet truly realized what’s at stake, they may well be the silent partner that has it in its hands to decide the final outcome. As soon as media companies realize what the end of net neutrality could mean for them, they will most certainly use all their power – which is still much – to struggle for their survival. Allied with the cable and telephone companies, media conglomerates are in fact strong enough to reverse the course of this revolution. Even against the “numbers”. Additionally because the way internet works nowadays – completely free and open – raises important social issues like pornography, violence, childhood threats, crime and terrorism and gives the lobby strong arguments against its freedom and openness. Although they are seldomly mentioned, these weak points of the internet have never been explored in the way that media conglomerates fighting for their life certainly could, and would. And probably will.

The end of Net Neutrality is the last hope for the media industry as we know it. Only if you allow internet carriers to charge differently the internet access on the supply side, can you expect to return to a situation close to the previous status quo. To condition the access of content providers to the net is to grant each of those providers a value that the current disperse offer can’t present. It’s true that an aerial TV channel has more power and strength (at least in Europe) than a cable TV channel (which, in a way, is very much in the hands of the cable operator). But, for most media companies, that solution – even on the dependency of cable operators – is better than simply cease to exist. Because – have no doubt – that is really the future of the media. Any important daily newspaper has already begun to feel the transfer of its audiences to the digital media and, within a timeframe that one can’t measure but will be no doubt shorter than expected, it will most probably became a small newsletter for the elite. Even if it manages to expand its brand into other areas within the new media landscape – something its consultants will recommend but its journalists will resist – the traditional newspaper will only be buying time. Its death remains certain.

Unlike what you sometimes hear or read, the end of the media as we know it is not the result of its past mistakes or the “distance” carved between the newspaper and its readers. The extinction is simply the unavoidable consequence of the new communications technologies and the way those technologies have socially structured. The path of the technologies can’t itself be stopped, but it is possible to act on the social conditions of its use. Through political regulation, that is. That’s why a strategic cooperation between media companies and cable and telephone operators, under the supervision of the government, is in deed so likely. After all, everybody has something to gain from a “healthier” regulation of the internet. As for the consumer, you can always argue that he will continue to pay his internet fee unchanged and still have a very interesting offer on his personal computer. Probably even better than he has today, simply as a result of the evolution of technology. 


It is quite easy to understand why Net Neutrality is mainly a political issue. But, in truth, the political aspects of it are even broader than Net Neutrality itself or the way we socially organize the internet. What is at stake today, as probably happened many times in past without we even noticing it, is the opposition between economic interest and public interest. Today, facing this issue, it is fairly simple to say on which side the economic and the public interest are, even if we take into account the question of the employment in the media industries. Because it is undeniable that the speeding of the evolution of web 2.0 in the past few years is mainly attributable to the openness and freedom of the internet. Even the usual argument that it is the search for profit that fuels innovation fails in this area, because most web 2.0 technologies and applications were developed without a clear profit motivation. Internet itself wasn’t born spontaneously, but it is far from the paradigm of economic motivations generating technical advancement. So, on one hand, we have, amongst other things, the enormous spread of information, the multiplicity of social connections and the ability for social mobilization that the current internet has to offer. Its public interest is undeniable. On the other hand, there’s an industry and a wide range of activities that are threatened, and, most of all, there’s a flow of value that is of utmost economic interest to exploit. Which – sorry leftists! – is also of great public interest. The distinction between economic interest and public interest is pretty obvious on this matter.

But this consideration about Net Neutrality leads us to think on how such technological changes may have been dwelt with in the past, mainly when dire social change was involved. The aerial TV is again a good example. I wonder: human society as a whole, did we become more civilized because there were a few channels with high ratings and high income? Or could we have been better served by hundreds of small channels run by the common man, some of them on a neighbourhood range, much closer to its recipients? If we take into consideration the recent developments of the internet, the answer seem all too obvious. The same could probably be said about many periods of change during the human history. And what is the lesson emerging from this?  It’s actually two lessons. One: public interest and economic interest don’t always coincide. Two: economical rationality is not the only rationality applicable to human phenomenon. I think that’s a lot!

Esta entrada foi publicada em Internet, Media com as etiquetas , , . ligação permanente.

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